Confidence Little Changed Amid Improving Views on U.S. Economy

May 30 (Bloomberg) -- Consumer sentiment last week hovered
near a five-year high as more Americans said the economy was
improving and their finances were mending.

The Bloomberg Consumer Comfort Index was at minus 29.7 in
the period ended May 26 compared with minus 29.4 a week earlier.
The margin of error for the figure is 3 percentage points. Views
on the current state of the economy matched a mid-April reading
as the strongest since January 2008.

Rising home and stock values are helping bolster confidence
among upper-income households as they recover losses suffered
during the recession. Nonetheless, the total index has shown
little forward momentum since reaching a five-year high of minus
28.9 in April, indicating those of less means are susceptible to
setbacks should employment cool or gasoline costs rise.

“Sustained improvement in employment, gasoline prices and
equities, which has created a modest wealth effect among
consumers at the upper end of the income spectrum, has continued
to support consumer confidence,” said Joseph Brusuelas, a
senior economist at Bloomberg LP in New York. “Overall
sentiment may stall near these levels without a commensurate
increase in wages and salaries down the income ladder.”

Sentiment for households earning between $75,000 and
$100,000 annually reached a five-year high, climbing last week
to within a point of the reading for those making even more.

Other reports over the past two weeks have corroborated
last month’s pickup in comfort. The Conference Board’s
confidence index rose in May to the highest level since February
2008, while the Thomson Reuters/University of Michigan sentiment
gauge reached an almost six-year high this month.

Housing Rebound

The rebound in housing is one reason for the brightening
moods. The S&P/Case-Shiller index of property values in 20
cities increased 10.9 percent in the year to March, the biggest
12-month gain since April 2006, a report showed this week.

The economy expanded less than previously estimated in the
first quarter as slower inventory building and cutbacks in
government spending overshadowed the biggest gain in consumer
purchases since the end of 2010, figures from the Commerce
Department showed today.

Another report today showed more Americans filed claims for
unemployment insurance payments last week as holiday closures
kept five states from completing a full count. Applications for
jobless benefits increased by 10,000 to 354,000 in the week
ended May 25, the Labor Department said.

Shares Climb

The Standard & Poor’s 500 Index rose 0.3 percent to
1,652.65 at 9.40 a.m. in New York. It reached a record close of
1,669.16 in May 21.

Among Americans with annual incomes of $100,000 or more,
the Bloomberg comfort index rose to 8.3 from 5.4 a week earlier.
Those highest-income households have registered positive
readings for 29 of the past 30 weeks. The gauge for consumers
earning between $75,000 and $100,000 climbed to 7.4 last week
from 1.2, the first back-to-back positive outcomes since
November 2007.

Households earning between $50,000 and $75,000 a year lost
ground for the third week, falling to minus 22.4 from minus
16.6. The gauge for those earning less than $15,000 a year was
minus 53.9, an improvement from minus 57.6 a week earlier.

Rising property and stock values are helping Americans cope
with an increase in payroll taxes and wage gains that have
barely kept up with inflation. Without improvements in the job
market, the bounce in confidence may prove temporary, said Gary
Langer, president of Langer Research Associates LLC in New York,
which conducts the comfort survey.

Need Momentum

“Gains in consumer sentiment merit a word of caution,”
Langer said. “More forward movement is much to be desired.
Without it, the recovery, while clearly under way, may prove
painfully slow.”

Two of the comfort index’s components improved last week.
The gauge on consumers’ current view about the economy climbed
to minus 54.7 from minus 55, while the measure of personal
finances rose to 2.8 from 1.3.

Fewer consumers said the time was right to purchase things.
A measure of the buying climate fell to minus 37.3 from minus
34.4 a week earlier. The measure reached a more than five-year
high of minus 31.5 three weeks ago.

Automakers

Auto manufacturers are among companies reaping the benefits
of improved consumer outlook. Honda Motor Co. is on pace to post
record U.S. sales this year, said Mike Accavitti, the company’s
U.S. marketing chief. The Tokyo-based company’s deliveries in
the U.S. gained 6 percent this year through April, to 468,650,
amid improved sales of its Acura, Civic and Accord models.

“We don’t see any huge disruption or trend on the
horizon,” Accavitti said in an interview yesterday. “We think
the market will continue to improve and Acura and Honda sales
will continue to grow as we planned.”

Kirkland’s Inc., a Nashville, Tennessee-based seller of
home accessories and gifts, is anticipating improved consumer
traffic after a drop in the first part of the year, President
and Chief Executive Robert Alderson said. Still, a potential
battle over the U.S. budget deficit and signals that Federal
Reserve policy makers may slow stimulus measures could stall
progress, he said.

“As we think about the outlook for the balance of the
retail year, recent pockets of improvement in the housing market
suggest a lift to consumer confidence and activity, especially
for middle-income consumers where housing has traditionally been
a reservoir of wealth similar to the equity and bond markets for
the more affluent,” Alderson said on a May 23 earnings call.

Survey Scope

The Bloomberg Consumer Comfort Index conducts telephone
surveys with a random sample of 1,000 consumers 18 and older.
Each week, 250 respondents are asked for their views on the
economy, personal finances and buying climate. The percentage of
negative responses is subtracted from the share of positive
views and divided by three. The most recent reading is based on
the average of responses over the previous four weeks.

The comfort index can range from 100, indicating every
participant in the survey had a positive response to all three
components, to minus 100, signaling all views were negative.